French companies got illegal aid: EU

20th December 2006, Comments 0 comments

LONDON, Dec 20, 2006 (AFP) - The European Commission will on Wednesday rule that some of France's biggest companies were given illegal aid in the form of government tax breaks, the Financial Times reported.

LONDON, Dec 20, 2006 (AFP) - The European Commission will on Wednesday rule that some of France's biggest companies were given illegal aid in the form of government tax breaks, the Financial Times reported.

According to the business daily, citing unidentified officials familiar with the case, the Commission will not require the companies, which include airline Air France, and banks BNP Paribas and Société Générale, to repay the benefits, despite legal advice to the contrary from the Commission's legal services.

The tax breaks involved banks and other financial institutions setting up so-called "fiscal economic interest groupings" (EIG) to buy assets such as ships or aircraft, and then leasing them out to groups that use them.

As part of the regime, the upfront investment in the asset could be offset against the banks' tax bills, thereby lowering costs for all parties involved.

The tax system will be abolished, but the companies will not be required to repay the aid they received between 1998, when it was first introduced, and April 2006, when the Commission reopened the case.

EU Competition Commissioner Neelie Kroes and her officials ruled that the companies would not have to repay the aid because after the Commission remained inactive for years on the issue, it had given France a "legitimate expectation" that its tax regime was legally correct.

According to the FT, it is not clear how much the aid was worth.

Citing officials familiar with the case, the daily said that the French government informed the Commission about its new tax system before it was introduced, but the regulator remained inactive on the issue.

It continued to leave things as they were despite receiving complaints from competitors of the beneficiaries, and only opened a probe into the issue in 2004 when Kroes became competition commissioner.

Copyright AFP

Subject: French news

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